July 1, 2004

 

 

China's Shrimp Industry Hurt By Anti-dumping Case
 

Chen's mounting losses in the shrimp industry are a consequence of the latest trade dispute between the United States and China, the world's largest and fastest-growing economy, respectively. Late last year, U.S. shrimpers and processors accused China and five other countries of dumping farm-raised shrimp in U.S. markets.

 

Now, as Gulf Coast fishermen stay at the dock rather than continue to bleed money, shrimpers warn that the entire U.S. industry could disappear unless the government acts. The Bush administration is scheduled to announce whether it will impose steep tariffs on the low-cost imports on Friday.

 

While the lawyers argue in Washington, China's shrimp farmers are feeling the pain of tariffs yet to be imposed. The market is all but paralyzed, as shrimp that would have gone to the USA remain home.

 

And amid election-year worries about the swollen U.S. trade deficit with China, the shrimp dispute is just one example of the conflicts that increasingly define the countries' commercial relationship.

 

"More and more anti-dumping cases will come. It has not reached a climax yet," says Ma Xiaoye, a former Chinese trade negotiator.

 

At issue in the shrimp dispute are imports totaling about $2.5 billion from Vietnam, Thailand, India, Brazil, Ecuador and China. Unlike the USA, where almost all shrimp are caught in the ocean, China raises nearly its entire 493,000-metric-ton annual output on coastal farms. About 40 percent is exported, with about half that going to the USA, says Cui He, senior engineer of the China Fisheries Association, a unit of the Agriculture Ministry.

 

U.S. fishing boats reel in just 12.4 percent of the shrimp Americans eat, down from almost 20 percent three years ago. China has been increasing its market share at the expense of U.S. producers faster than any of the other targeted countries, according to International Trade Commission data.

 

Still, the claim that foreign producers are "dumping," or selling at artificially low prices, is hotly contested not only by foreign suppliers, but also by U.S. restaurants. They say tariffs will increase consumer costs without improving the domestic industry's long-term prospects. Even companies seeking the protective tariffs concede that under any circumstances, the U.S. industry cannot meet domestic demand by itself.

 

Since tariffs would apply retroactively to shipments since April, exports to the USA ground to a near halt beginning that month, traders say. Thousands of tons of Chinese shrimp that would have gone to that country's No. 1 market have stayed home, depressing local prices. One year ago, the smallest shrimp could be sold in China for 18 yuan, or $2.17, per kilogram, a little more than two pounds. Today, it sells for 14 yuan, or $1.69, per kilo.

 

From 1978 to 1993, China's shrimp farmers enjoyed an almost unbroken rise. As the country embraced capitalism, shrimp farms blossomed along more than 11,000 miles of coastline from Hainan in the south to Liaoning in the northeast. About 1 million people are directly or indirectly employed in the industry, Cui says.

 

A wave of disease that struck for several years beginning in 1993 threw the industry into turmoil. By 1999, the Chinese had switched to a different type of shrimp called vannamei white, and the industry resumed its growth. In 2000, the European Union banned Chinese imports after finding traces of an antibiotic in some. Cut off from their principal customer, the Chinese turned to the USA.

 

Last year, U.S. imports of Chinese shrimp rose 74 percent, making China the fastest-growing U.S. supplier. But farmers here are bracing for what they regard as inevitable U.S. tariffs in Friday's preliminary decision by the Commerce Department. Final action would occur later this year.

 

In February, the ITC took the first step toward levying new duties, ruling that imports had damaged American producers. The key evidence was that prices for various types of shrimp fell 16 percent to 62 percent in the three years ended last summer.

 

Deborah Regan, spokeswoman for the Southern Shrimp Alliance, whose members launched the dumping complaint, says "tens of thousands" of jobs have been lost in eight coastal states from Texas to North Carolina, and an equivalent number remain at risk.

 

The ITC's ruling suggested tariffs on Chinese imports could be as high as 264 percent while those on Thailand, its principal competitor in vannamei white shrimp, would be about 58 percent.

The reason lies in the fine print of China's deal to join the World Trade Organization in 2001. As part of the bargain that sealed China's membership, Beijing agreed to be regarded until 2016 as a "non-market" or not entirely free-market economy. That makes it far easier for the U.S. and other WTO members to pursue dumping complaints against Chinese manufacturers. Indeed, the U.S. already has filed 23 dumping complaints against China.

 

When calculating fair prices for products from non-market suppliers, the Commerce Department ignores the countries' own price and cost data. Instead, it uses figures from free-market countries, presumed to be at a similar stage of development.